Friday, April 27, 2007

Returns on Climate Change

Nearly every day I scan the headlines and I see news of one business leader or another speaking out about climate change and global warming. These are men and women who usually fight to drive sales, reduce costs and maximize profits. Now they appear to be fighting for the planet.

▪ In a speech at his alma mater, Stanford University, John Browne, CEO of
BP PLc (BP: NYSE), recently called for the formation of an international climate agency.

▪ John Rowe, Chairman of
Exelon Corp. (EXC: NYSE) advocates mandatory carbon constraints.

American Electric Power Co. (AEP: NYSE) directors have shifted strategies in the last ten years to embrace limits on carbon emissions from the company’s coal-fired power plants.

The power companies are not isolated examples.
Brocade Communications Systems (BRCD: Nasdaq) recently joined The Green Grid, a consortium of information technology companies and industry professionals seeking to lower the overall consumption of power in data centers. The creation of efficiencies among users is another way to reduce carbon emissions. So far the group has forty members, including Intel, Microsoft, Sun, Hewlett Packard, and IBM.

The Climate Group has made a low carbon economy its objective and is trying to “catalyze business and government leadership on climate change.” BP is on this bandwagon, along with Duke Energy Corp. (DUK: NYSE) and Alcan, Inc. (AL: NYSE). A number of state and local government agencies are also members, such as the States of New York, Maine and Connecticut.

Why is business so far ahead of Congress and the White House on the global warming threat to our environment? Perhaps it is because business people deal with facts. The dollars and cents of commerce discourage managers from straying too far and too long from reality. After all what kind of market would there be if consumers are all floating around on make shift rafts as portrayed in Kevin Costner’s Waterworld movie.

Fossil fuel shortages and global warming are inextricably intertwined. In the next few posts, I will be looking at the business implications of energy conservation policies and practices. Is business just posturing or are these environmental initiatives going to have a real impact on the bottom line? Is there a business model for the proposed underground carbon storage sites? Which fossil fuel substitutes present the best profit potential - ethanol, biofuel, hydrogen?

Neither the author of the Small Cap Copy web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

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